Currencies have existed for thousands of years. As a means of simplifying trade, moving beyond subsistence, and allowing banking systems to be created, governments create currency as the official currency for use within their country. In many cases, it is necessary for the currency to be used beyond the borders of its home country. In particular, international trade between entities in different countries often takes place using the currency of one of the countries, in accordance with the known valuation of that currency respect to the currency of the other country.
Perhaps out of a desire to avoid control of monetary transactions by individual governments in an increasingly international environment, and perhaps out of a desire to meet the sophistication of modern transactions with an equally sophisticated monetary instrument, so called “digital currencies” have arisen. While there is some debate regarding terminology among the media and banking officials, digital currency is a digital form of virtual currency. A further example of a digital currency is a cryptocurrency, which uses cryptographic principles for authenticating transactions.
Bitcoin was the first cryptocurrency created in 2009. Bitcoin was created in the context of a distributed, decentralized system. Its monetary unit—also called “Bitcoin”—exists only by virtue of a ledger maintained by numerous entities on a worldwide computer network, known as a block chain transaction ledger. All transactions involving Bitcoin are accounted for on the block chain. Access to one's Bitcoin is provided by possession of two keys: a public key, which is tantamount to an account number, and a private key. Software is often used to facilitate transactions by keeping these keys conveniently available for the Bitcoin user (such as on their personal computer, smartphone or the like) in what is sometimes called a “wallet”. Since Bitcoin was introduced, many other digital currencies have been created with varying success.
The value of any currency is often measured against other currencies. That is, the value of a currency is commonly defined by its ability to buy another currency. Values of currencies fluctuate due to a variety of factors. Because of its newness and since trust, usage, and acceptance of digital currency is constantly evolving, its value can fluctuate wildly.
Currency value fluctuation can be both desirable and undesirable. Clearly, some people value stability, as they want to know that they can rely on its buying power for purchasing goods and services. Just as investors often do by trading traditional currencies on money markets, profit can be made by shrewd investors when the value of digital currencies fluctuate. Accordingly, some investors may buy digital currencies on speculation, hoping the gain through large increases in value. Other investors position themselves to profit when the relative value of the digital currency decreases.
Clearly, however, the growth and success of a currency depends more upon its acceptance by consumers than by investors. Volatility is a significant barrier for consumer adoption of digital currencies. Reduction of the risk to consumers due to volatility, is therefore critical to the success of digital currencies.
Also, with the decentralization of many financial markets, the possibility is arising for a currency system that seeks to provide the stability desired by consumers, and serves the investment potential desired by others.
Various systems have been devised that facilitate transactions of digital currency, or for optimizing trades on futures markets. While these units may be suitable for the particular purpose employed, or for general use, they would not be as suitable for the purposes of the present invention as disclosed hereafter.